April 7, 2022
Dear Ms. Countryman,
The Full Employment for Plaintiffs Counsel Committee would like to applaud the Commission for its proposed rules with respect to special purpose acquisition companies, or SPACs. Some say that Christmas comes but once a year. With the issuance of the proposals, it will come twice this year, and three times if the Commission adopts the rules as proposed this year.
There are so many goodies in the proposals, its difficult to know where to begin.
Requiring the SPAC and target to state whether a transaction is fair to stockholders - brilliant. After page after page stating why de-SPAC transactions are effectively the same as IPOs, you propose a provision that would never in a million years be found in an IPO prospectus. If the SPAC does not succeed, regardless the reason, I will have easy pickings in asserting claims. You may say that the SPAC can easily blunt its liability by obtaining a fairness opinion, but I can easily find flaws in any fairness opinion from the vantage of hindsight. And, guess what, out of whose pocket will the cost of the fairness opinion come? You guessed it - the STOCKHOLDERS. More for them to pay and less available for the company to struggle with my claim.
And requiring the IPO underwriter and possibly others to be responsible for the de-SPAC registration statement - also brilliant. Now I have some seriously deep pockets to sue. Of course, the underwriter will want to compensated for its risk, conduct due diligence, retain counsel in connection with the de-SPAC, insist on receiving opinion letters from SPAC and target counsel, as well as comfort letters from auditors. And, out of whose pocket will the millions required to do this come? Yes again - THE STOCKHOLDERS. Why should a company use its funds to conduct a business when it can better use its money to soothe the liability anxieties of bankers?
And lurking in the back will be the D and O insurers, who will no doubt want to price their insurance to cover the new potential securities law liabilities you seem so eager to impose. And who will pay for this? THE STOCKHOLDERS.
You guys are onto something. Your proposed rulemaking is a true blessing.
If the Commission were my spouse, I couldn't afford you. You guys are incredible spendthrifts when it comes to spending other people's money. And the joke is that your proposals pull money out of the pockets of public stockholders while at the same time you're saying you're protecting them. Amazing. The less money the SPAC has at the time of a de-SPAC because of your proposals, the more dilution the public stockholders will suffer at vis-a-vis the target. Where is that in your proposals?
As you probably know, I don't really care about winning a claim at trial. Why go through that laborious process when you're giving me the tools to exact a hard bargain in any settlement? And I really appreciate the effort. I need a few new Lamborghinis every year to keep up with my neighbors.
Keep up the great work.
Anonymous